01/14/2010

Too Many Lawyers? Too Many Law Schools?

Remember the old joke about 20,000 lawyers at the bottom of the sea being "a good start"? Well, in an interesting twist, thousands of lawyers now find themselves drowning in the unemployment line as the legal sector is being badly saturated with attorneys.

Part of the problem can be traced to the American Bar Assn., which continues to allow unneeded new schools to open and refuses to properly regulate the schools, many of which release numbers that paint an overly rosy picture of employment prospects for their recent graduates. There is a finite number of jobs for lawyers, and this continual flood of graduates only suppresses wages. Because the ABA has repeatedly signaled its unwillingness to adapt to this changing reality, the federal government should consider taking steps to stop the rapid flow of attorneys into a marketplace that cannot sustain them.

From 2004 through 2008, the field grew less than 1% per year on average, going from 735,000 people making a living as attorneys to just 760,000, with the Bureau of Labor Statistics postulating that the field will grow at the same rate through 2016. Taking into account retirements, deaths and that the bureau's data is pre-recession, the number of new positions is likely to be fewer than 30,000 per year. That is far fewer than what's needed to accommodate the 45,000 juris doctors graduating from U.S. law schools each year.

The basic problem is that people rack up an average $92,000 in debt (for private law schools) because of the implied promise of a high-paying job at the end. Except that industry predications indicate that there are likely to be less than 30,000 legal jobs available per year. Some 45,000 people graduate from law school every year.

Some of those graduates will go on to fame and fortune. But Feliz Salmon has posted an interesting chart that is quite telling about the prospects of many law graduates:

Salmon observes that:

In order to make law school work (assuming you’re not paying cash for your tuition and living expenses), you basically need to end up in that second hump, over to the right: Biglaw, as it’s known. But a glance at the chart shows that most law students won’t make it there.

And most of those who do end up in the Biglaw hump won't stay there because most won't make partner.

None of this should be very surprising to regular readers of this blog. As I have argued before,law is a mature industry. As a result, I argued:

... we face a problem of systemic oversupply. The rate at which demand for new lawyers grows has permanently leveled off. Economic recovery will help, but it will not change the fundamental structural changes in the market for lawyers. Unfortunately, the growth in the number of law schools and size of entering classes at many law schools was premised on the assumption that the demand for lawyers would continue to rise at the high rate characteristic of the period, say, 1960-1990. Because that growth rate was artificially high due to the exogenous shocks of the preceding decades, the number of law schools and large law school class sizes no longer make sense. Indeed, if law schools continue to grow in number and size at their current rate, the gap between demand for new lawyers and the number of new lawyers will continue to rise every year. Put another way, we have been growing the number of law schools as though the demand for lawyers would permanently continue to experience exponential growth, whereas in fact it follows the classic natural growth S-curve.

What's to be done about all this? Greenbaum proposes that:

Because the ABA has repeatedly signaled its unwillingness to adapt to this changing reality, the federal government should consider taking steps to stop the rapid flow of attorneys into a marketplace that cannot sustain them.

In other words, let's make the legal profession even more of an oligarchic cartel than it already is. Matthew Yglesias takes that idea to the proverbial woodshed:

It’s definitely true that it would be good for incumbent lawyers for the federal government to step in and shield them from competition from large numbers of new law school graduates. But at the same time a “continual flood of graduates” that “only suppresses wages” actually does a lot more than suppress wages, it reduces the cost of legal advice. You could say that the flood of new smart phones like the Palm Pre and the Nexus One suppresses profits at Apple, but it would be foolish to say that it only suppresses profits at Apple. It also creates new opportunities for consumers. ...

... An oversupply of skilled professionals is annoying for skilled professionals. But it’s a boon to the rest of the population. We generally accept the idea that putting low-skill laborers in competition with Chinese factories and Mexican immigrants ultimately makes a larger pie for everyone. It’s just the same with putting lawyers in competition with lots of new law school graduates. The only difference is that one set of pie-growing measures also tends to exacerbate inequality, whereas expanding the number of lawyers is good for less-educated people.

With respect to most labor cartels, I would agree with Yglesias. Although I also agree with Larry Ribstein that:

[T]he current system of forcing everybody who wants to practice any kind of law into three-year, high-priced law schools will never produce . . . competition. Instead, the cartel forces practical/doctrinal training to coexist uneasily with lawyer-scholars, and results in training that compromises the needs of all kinds of lawyers.

In any event, another concern is that having too many lawyers has costs for society not just for members of the legal profession. Among other things, it's a major contributing factor to the various litigation crises brought to us by Trial Lawyers, Inc. So, as far as lawyers go, maybe we do need to restrict the supply.

Greenbaum's other proposed solution to the oversupply of lawyers is even more absurd than his first, however:

The U.S. Department of Education should strip the ABA of its accreditor status and give the authority to an organization that is free of conflicts of interest, such as the Assn. of American Law Schools or a new group. Although the AALS is made up of law schools, it is an independent, nonprofit, academic -- not professional -- group, which could be expected to maintain the viability and status of the profession, properly regulate law schools, curtail the opening of new programs and perhaps even shut down unneeded schools. The AALS has cast a very skeptical eye on for-profit schools, compared with the ABA's weak hands-off accreditation policies.

As I have emphasized many times on this blog, the AALS is not an independent, learned academic society but rather a cartel whose principal purpose in life is to impose a uniformly dreary, left-liberal, multicultural, politically correct approach to legal education on all American law schools. See, e.g., AALS: A Learned Society or a Bunch of Left-Liberal Busybodies?

Instead, as I have written before:

My suggestion? Assuming we aren't going to have real free markets for legal services, but will continue to have such barriers to entry as ABA law school accreditation, bar exams, and so on, which presumably would solve the problem, we need to constrict supply. Lop off the bottom third of law schools and see if that solves it.

Comments

Remember the old joke about 20,000 lawyers at the bottom of the sea being "a good start"? Well, in an interesting twist, thousands of lawyers now find themselves drowning in the unemployment line as the legal sector is being badly saturated with attorneys.

Part of the problem can be traced to the American Bar Assn., which continues to allow unneeded new schools to open and refuses to properly regulate the schools, many of which release numbers that paint an overly rosy picture of employment prospects for their recent graduates. There is a finite number of jobs for lawyers, and this continual flood of graduates only suppresses wages. Because the ABA has repeatedly signaled its unwillingness to adapt to this changing reality, the federal government should consider taking steps to stop the rapid flow of attorneys into a marketplace that cannot sustain them.

From 2004 through 2008, the field grew less than 1% per year on average, going from 735,000 people making a living as attorneys to just 760,000, with the Bureau of Labor Statistics postulating that the field will grow at the same rate through 2016. Taking into account retirements, deaths and that the bureau's data is pre-recession, the number of new positions is likely to be fewer than 30,000 per year. That is far fewer than what's needed to accommodate the 45,000 juris doctors graduating from U.S. law schools each year.

The basic problem is that people rack up an average $92,000 in debt (for private law schools) because of the implied promise of a high-paying job at the end. Except that industry predications indicate that there are likely to be less than 30,000 legal jobs available per year. Some 45,000 people graduate from law school every year.

Some of those graduates will go on to fame and fortune. But Feliz Salmon has posted an interesting chart that is quite telling about the prospects of many law graduates:

Salmon observes that:

In order to make law school work (assuming you’re not paying cash for your tuition and living expenses), you basically need to end up in that second hump, over to the right: Biglaw, as it’s known. But a glance at the chart shows that most law students won’t make it there.

And most of those who do end up in the Biglaw hump won't stay there because most won't make partner.

None of this should be very surprising to regular readers of this blog. As I have argued before,law is a mature industry. As a result, I argued:

... we face a problem of systemic oversupply. The rate at which demand for new lawyers grows has permanently leveled off. Economic recovery will help, but it will not change the fundamental structural changes in the market for lawyers. Unfortunately, the growth in the number of law schools and size of entering classes at many law schools was premised on the assumption that the demand for lawyers would continue to rise at the high rate characteristic of the period, say, 1960-1990. Because that growth rate was artificially high due to the exogenous shocks of the preceding decades, the number of law schools and large law school class sizes no longer make sense. Indeed, if law schools continue to grow in number and size at their current rate, the gap between demand for new lawyers and the number of new lawyers will continue to rise every year. Put another way, we have been growing the number of law schools as though the demand for lawyers would permanently continue to experience exponential growth, whereas in fact it follows the classic natural growth S-curve.

What's to be done about all this? Greenbaum proposes that:

Because the ABA has repeatedly signaled its unwillingness to adapt to this changing reality, the federal government should consider taking steps to stop the rapid flow of attorneys into a marketplace that cannot sustain them.

In other words, let's make the legal profession even more of an oligarchic cartel than it already is. Matthew Yglesias takes that idea to the proverbial woodshed:

It’s definitely true that it would be good for incumbent lawyers for the federal government to step in and shield them from competition from large numbers of new law school graduates. But at the same time a “continual flood of graduates” that “only suppresses wages” actually does a lot more than suppress wages, it reduces the cost of legal advice. You could say that the flood of new smart phones like the Palm Pre and the Nexus One suppresses profits at Apple, but it would be foolish to say that it only suppresses profits at Apple. It also creates new opportunities for consumers. ...

... An oversupply of skilled professionals is annoying for skilled professionals. But it’s a boon to the rest of the population. We generally accept the idea that putting low-skill laborers in competition with Chinese factories and Mexican immigrants ultimately makes a larger pie for everyone. It’s just the same with putting lawyers in competition with lots of new law school graduates. The only difference is that one set of pie-growing measures also tends to exacerbate inequality, whereas expanding the number of lawyers is good for less-educated people.

With respect to most labor cartels, I would agree with Yglesias. Although I also agree with Larry Ribstein that:

[T]he current system of forcing everybody who wants to practice any kind of law into three-year, high-priced law schools will never produce . . . competition. Instead, the cartel forces practical/doctrinal training to coexist uneasily with lawyer-scholars, and results in training that compromises the needs of all kinds of lawyers.

In any event, another concern is that having too many lawyers has costs for society not just for members of the legal profession. Among other things, it's a major contributing factor to the various litigation crises brought to us by Trial Lawyers, Inc. So, as far as lawyers go, maybe we do need to restrict the supply.

Greenbaum's other proposed solution to the oversupply of lawyers is even more absurd than his first, however:

The U.S. Department of Education should strip the ABA of its accreditor status and give the authority to an organization that is free of conflicts of interest, such as the Assn. of American Law Schools or a new group. Although the AALS is made up of law schools, it is an independent, nonprofit, academic -- not professional -- group, which could be expected to maintain the viability and status of the profession, properly regulate law schools, curtail the opening of new programs and perhaps even shut down unneeded schools. The AALS has cast a very skeptical eye on for-profit schools, compared with the ABA's weak hands-off accreditation policies.

As I have emphasized many times on this blog, the AALS is not an independent, learned academic society but rather a cartel whose principal purpose in life is to impose a uniformly dreary, left-liberal, multicultural, politically correct approach to legal education on all American law schools. See, e.g., AALS: A Learned Society or a Bunch of Left-Liberal Busybodies?

Instead, as I have written before:

My suggestion? Assuming we aren't going to have real free markets for legal services, but will continue to have such barriers to entry as ABA law school accreditation, bar exams, and so on, which presumably would solve the problem, we need to constrict supply. Lop off the bottom third of law schools and see if that solves it.